Forex Technical Analysis: Trend Lines

Trendlines are probably the most commonly used patterns in technical analysis. At the same time, it is probably the most glaringly underutilized of all analytical tools.

If the trend lines drawn are correct, the accuracy of using them will be no less accurate than other methods. Unfortunately, the vast majority of Forex traders do not draw trend lines correctly, or try to make the trend lines fit the Forex market trends.

How to draw trend lines on Forex charts?

In order to draw a proper trend line, all you need to do is locate two major highs or lows and connect them in a line.

What’s next?

Do nothing.

That’s it?

Yes, it’s that simple!

Types of trend lines

There are three types of trend lines:

1. Rising trend line (low points continue to rise)

2. Downtrend line (high points continue to decrease)

3. Sideways trend line (range fluctuation)

Here are a few things to keep in mind about trend lines:

1. At least two tops or bottoms are needed to draw a valid trend line, but a third point is needed to determine the trend line.

2. The steeper the trend line drawn, the lower its reliability and the greater the chance of it being broken through.

3. Like horizontal support and resistance levels, the more times a trend line is tested, the stronger its role as a support or resistance level.

4. The most important thing is to never force the trend line you draw to adapt to the Forex market. If they do not fit the trends in the Forex market, then the trend lines are invalid.

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